tv Nightly Business Report PBS February 16, 2012 1:00am-1:30am PST
>> susie: stocks post their biggest loss this year as investors are rattled by fresh >> tom: china's heir apparent comes to washington, urging greater cooperation with the u.s. on trade and security. but on the campaign trail, president obama pushes back. >> today you're selling products directly to customers in china, stamped with those words "made in america." >> susie: it's "nightly business report" for wednesday, february 15. this is "nightly business report" with susie gharib and tom hudson. "nightly business report" is made possible by:
captioning sponsored by wpbt >> susie: good evening, everyone. wall street and main street got an inside look today at the debate inside the federal reserve on what to do next to fix the economy. tom, it looks like few policymakers believe they need to buy more government bonds-- a third round of so-called quantitative easing, or "qe3"-- to support the u.s. economy. >> tom: susie, we got the inside look from the minutes of the central bank's january meeting. that's when policymakers continued to hold interest rates at record lows, but extended that pledge until at least late 2014.
and it's the first time we saw detailed information on the discussion and voting. here's what we learned: a few members favor another round of q.e., but a number remain "open" if the economy deteriorates. many officials noted better- than-expected data on the economy, others pointed to "less favorable data". while president of the richmond federal reserve jeffrey lacker expects raising interest rates before 2014 to head off a spike in inflation, others called inflation "subdued." >> susie: stocks sold off on word that the fed will not pump more money in the economy. the dow lost 97 points, its biggest drop for 2012. the nasdaq was down 16 and the s&p fell seven. >> susie: joining us now? robert brusca, chief economist at fact and opinion economics. hi, bob. >> hi, susie. >> susie: so, based on what you learned, do you have a better idea of what the next
step is going to be from the fed on getting the economy to grow again? >> yeah, i think the fed is pretty clear, at least in terms of what the majority thinks. the fed really is worried about the economy. still sees that risk of deflation out there, at least at the time of these minutes was unconvinced that the economy was really accelerating to any extent. and the fed sees this long period in which it's going to keep interest rates very, very low ahead of us, as the most likely case, not the only case. >> susie: well, bob, since that january meeting, we've gotten a lot more data on the economy, whether we're talking about that really strong jobs report, today's home builders report, which was a little more upbeat and optimistic, some good news on manufacturing. what do you think is the health of the economy, how would you describe it? >> well, i'd describe it as mending, and maybe mending a little faster than the fed thinks.
but let's remember, we've had false starts before, and we heard chairman bernanke speak to us since these numbers are out and on the table. and it's pretty clear to me that the chairman's point of view is that he wants the economic data to show him something. he isn't going to buy into a strong economy on that strong job effort report. he wants the unemployment rate to be lower, and i think he'll take some risk with inflation, but he's than could convinced that the economic data are that strong. >> susie: there was a lot of talk today on wall street about a comment from the dallas fed prt richard fisher, i'm sure you heard it, he was telling reporters that q. e. three is a wall street fantasy. what's your take on that? >> well, mr. fisher doesn't really mince words, he's telling you that as far as he's concerned there's not going to be a q. three, and that's my forecast. i thought the economy was
going to do better, i thought it was going to grow and thought it would be strong enough that you would not see a q. three, and it's hard to puzzle out because you have the fed's minutes, but time changes, we don't really know what all those people on the fed think now after having seen the new data. and so we have to listen to them this public one by one register new opinions, and time stamp them. >> susie: so do you like this new fed? all this new information that they're giving, you know, putting out for everyone? does this help investors, does this help economists like you? or is it making things more confusing? >> well, i'd rather know how the fed thinks than what the fed thinks. the problem with this is that we know what the fed thinks about some various scenarios at a point in time, and in fact it's kind of a -- we know that different people think different things. but even if you stick with the main thrust of what they're saying, sometime down the road when events begin to develop,
we may find a situation that seems to be very close to this situation they've laid out now, but they do something differently because not everything is the same. in short this is a conditional outlook and the fed can't possibly know today everything that's going to happen one, two or three years out. that's why this isn't particularly useful. >> susie: all right. well, stay tuned, we're going to keep monitoring this. thanks so much, bob. >> thank you, susie. >> susie: we've been speaking with robert brusca, the chief economist at fact and opinion economics. >> tom: still ahead, apple, like many companies, is sitting on a big stash of cash, from dividends to fresh acquisitions. what it will take to get that money off the sidelines. >> susie: the complex relationship between the u.s. and china was on full display today as chinese vice president xi continued his trip across america. in washington, xi talked up the business relationship between the two countries while several states away president obama pushed policies that would crack down on china's trade practices.
darren gersh takes a look at the future of business between the two countries. >> reporter: the man set to become china's next leader compared the relationship between the u.s. and china to an unstoppable river, one that has created the fastest growing export market for u.s. manufacturers. chinese vice president xi jinping's speech to business leaders was polite, but also drove home a key point. u.s.-china trade will top half a trillion dollars this year. >> once open, the door to local exchanges and cooperation between china and the united states cannot be closed by any force. on the contrary, it will only be opened wider and wider. >> reporter: but shortly after xi spoke, president obama was in milwaukee trying to hold back the river. the president came to this masterlock factory because it has brought 100 jobs back home and is shipping locks overseas to china. talking to workers, the president promised to do more to boost manufacturing while also
cracking down on what he called unfair subsidies for chinese companies. >> i directed my administration to create a trade enforcement unit, and it's only got one job: investigating unfair trade practices in countries like china, making sure we've got an even playing field, because when we've got an even playing field, i promise you, nobody's going to out-compete america. >> reporter: even in hyper- partisan washington, democrats and republicans both want to see the administration take a tougher line with china. as chair of the ways and means committee, david camp helps write the nation's trade laws. >> we need china to follow the rules and we need them to do that in a variety of areas, whether that's currency-- we can't have an artificial currency there-- we certainly need them to honor our intellectual property and not steal it. it's not just trade.
>> reporter: the pentagon is shifting troops, money and attention to asia to counter china's growing clout. but economist arvind subramanian says the u.s. may no longer have enough power to bend chinese policy its way. subramanian says the u.s. needs to reach out to allies who also worry china's trade policies are hollowing out their industries. >> the river is kind of flowing, and it's not easy to stop that on your own. china, the u.s. cannot-- to continue this metaphor-- cannot build this dam on its own to check the chinese river. >> reporter: economic pressures will also play a role in directing vice president xi's unstoppable river of trade. masterlock says it brought jobs back home because of rising costs in china and a shortage of skilled labor. darren gersh, "nightly business report," washington. >> tom: extending the payroll tax cut could be voted on by the u.s. house before the end of the week. that's the forecast from house speaker john boehner. other republican leaders in the house see enough support for the measure to pass. all this comes as a tentative deal has been struck to continue the tax cut beyond the end of
february. the package would also continue extended jobless benefits and prevent deep cuts in medicare payments to doctors. >> susie: robert zoellick, the head of the world bank, is stepping down and it's possible his successor could be the first non-american to lead the international lending organization. zoellick will leave the world bank when his five-year term expires in june. he oversaw its response to the global financial crisis. last year, the bank adopted new guidelines for choosing its leader, calling for an "open, merit-based" process. an american has traditionally led the world bank since it was created 68 years ago. >> tom: at one point today, the market was at its highest point since july. we didn't finish the day there, though. if you last check on the s&p 500 at noon eastern time, it looked pretty bullish.
but after the federal reserve released its meeting minutes, sellers pushed the index into negative territory. pulling out to a one-year chart, you can see the market has had trouble around these prices. last april, and twice last july, the index was turned back from these levels. the bulk of the weakness today was concentrated in the industrial sector, led lower by deere. the farm and construction equipment maker reported earnings six cents ahead of estimates. it also bumped up its outlook for the rest of the year. still, there was some cause for concern. deere stock ran down-- losing more than 5%, down to a five- week low. volume almost quadrupled. investors honed in on a less- than-expected increase in sales, pushing the stock down. the most industrial companies making up the dow industrials all fell at least 1%. those include united technologies, caterpillar, alcoa and general electric. less than a week after the buyout of pringles by diamond
foods, was thrown into question. thanks to an accounting investigation and management change, kellogg will swallow the potato chip maker. kellogg buys pringles from procter & gamble, paying $27 billion in cash. the deal makes kellogg the world's second biggest snack maker, just behind pepsi and its frito-lay business. the deal added $1 billion dollars of market value to kellogg stock, thanks to today's 5% jump. snacks will account for as much of kellogg's revenue as its cereal business. shares of the previous buyer, diamond foods, rallied 5% but remain down considerably since the accounting investigation began. while technology stocks were weaker overall, telecom gear maker juniper was jumping over hopes it will soon see a big phone company doing some buying. juniper stock shot up 7% with strong volume. broker firm jefferies notes at&t released its budget for new gear, and jefferies thinks juniper is best positioned to see its stock price benefit. after the close, earnings from
nvidia were in focus. the semiconductor maker's results were in line with estimates, but down from a year ago. the company blamed the shortage of disk drives for the lack of a positive earnings surprise. shares were down just a fraction awaiting the results, but after the closing bell the stock fell almost 5%-- below $15.50 per share. blame the company's revenue forecast for the current quarter. it was less than anticipated. and that's tonight's "market focus." >> susie: even apple wasn't immune to today's weak market. this morning shares hit a new high of $525 before falling back below $500 by the closing bell. the latest moves come as apple c.e.o. tim cook said tuesday that management is actively discussing what to do with its huge stash of cash. and, as suzanne pratt reports, apple is not alone. >> reporter: $100 billion dollars.
that's what apple currently has in its piggy bank. that's a lot of moolah. so much that the company could buy ipads for a 100 million people and still have plenty left over. apple could also give back to its shareholders in the form of a dividend-- something wall street is clamoring for. but, apple isn't doing anything, at least not yet. analyst abahey lamba predicts that will change sometime this year. >> we think it's more likely that they do a sustainable dividend, starting at about $5 to $10 per share, and they also use some cash to buy back shares. keep in mind they still generate a lot of free cash flow, so its not only what's sitting on the balance sheet, it's an ongoing thing. >> reporter: internet search giant google and software king microsoft also have oodles of cash in the bank. so do lots of other large public companies, particularly technology names. quickly accumulating money on a balance sheet often signals a
healthy company, and that's a good thing. but, some financial experts, like n.y.u. professor larry white, say too much cash can also be bad. >> it's clearly not a very high- productivity use of your resources. and, so... so, it's a wasting asset. >> reporter: perhaps management isn't working hard enough to find investment opportunities, particularly strategic acquisitions. cash-rich firms can also get careless, falling prey to wasteful spending. and, most importantly, experts say management should be doing its utmost to keep shareholders happy. >> you really don't want to have too much cash on your balance sheet, simply because it's not generating any return for your shareholders. >> reporter: experts say shareholders need to demand that companies stuffed with cash pay more dividends. today, s&p 500 firms yield only
about 2%, with one in five not paying any dividends at all. suzanne pratt, "nightly business report," new york. >> tom: call it the goldilocks rally. mid-sized stocks have done better than smaller companies or big corporations. not too big, not too small-- just right. tonight's "street critique" guest is looking for opportunities in midcaps. he's mark watson, c.e.o. and chief investment officer of keel
asset management. welcome back. what's helped mid caps perform better as a group this year? >> i think the consensus investor is now moving back into risk. if you look at the fourth quarter, for example, banks did poorly, industrial stocks did poorly. mid cap sector has a greater preponderance of financial stocks, and this year on top of the jobs number, housing numbers, et cetera, the consensus investor is moving back into these sectors. >> tom: you're taking a look at a couple of different ideas within mid caps and financials, beginning with american capital. ticker symbol acas, essentially a publicly traded private equity firm. the share price has performed well this year, but not so well last year. >> absolutely. we think we are expecting recovery in the u.s. market, and certainly a private equity venture capital concern that focuses on industrials and energy, particularly solar and
liquid gas, is an excellent way to participate in this recovery. >> tom: one of the problems that american capital had last year was big debt load and it's had that for the past couple years, still a billion dollars in debt. does that concern you? >> it doesn't it. i went true a recapitalization program which basically for us was a reset of so now they have the ability with an improving market to monetize some of the successful investment they've already made and make new investments that will provide good returns with a very low cost of capital. >> tom: your other mid cap play is more traditional in finance, city national. regional banks have done pretty good, this one based in california, and in southern california at that. we know what the housing market is like in some of these sand states like california, nevada, florida. why take a chance with cyn? >> well, city national is unusual in that it has a very narrow niche in terms of loaning money to entrepreneurs who have been successful. so their residential mortgages
are tied to customers really they know from many points of view. as a result, the dividend has been safe, a 2% yield, close to market multiple, but we think it has a good growth potential in terms of earnings, with very low credit risk. >> tom: okay. how about for you and your clients, do you own positions in both the stocks? >> yes, we do. >> tom: all right. you can e-mail us if you have questions about the pick, street critique at nbr.com and questions coming up in the weeks ahead. our guest this evening, mark watson, of keel asset management. thank you, mark. >> susie: here's what we're watching for tomorrow: a check on inflation at the wholesale level, with the january producer price index. the latest numbers on housing starts and weekly jobless claims. also tomorrow? general motors reports earnings. we'll see how g.m.'s turnaround is going and whether it's losing any traction in europe.
>> susie: former countrywide financial c.e.o. angelo mozilo could soon be answering new questions on capitol hill. house lawmakers have asked mozilo to testifabout discounted mortgages given to members of congress as home prices were soaring. the letter cited documents that allegedly show mozilo personally referred lawmakers to a v.i.p. lending program known inside countrywide as "friends of angelo." countrywide was the nation's biggest subrpime lender before housing collapsed. >> tom: cisco systems is suing the european commission for approving microsoft's takeover of online voice and video calling service skype. cisco doesn't oppose the deal but it wants european regulators to force conditions on microsoft. it thinks skype users should to be able to connect with other web conferencing services like cisco's own web-ex system. cisco likens it to having a cell phone on one service and not being able to call users of a different service.
>> susie: in the movie >> susie: in the movie "flashdance," jennifer beals' character wielded a blow torch during the day and danced at night. but what seemed like a novelty in that 1983 film could become more of the norm today. skilled welders are in high demand and that's attracting more women to the trade. diane eastabrook takes us to a program in chicago that is
arming women with the skills to complete in what has been a field for men only. >> it's going to be $9.20. >> reporter: on tuesday and thursday nights, jasmine lopez works the cash register and makes sandwiches at a subway restaurant on chicago's south side. but on monday and wednesday nights, she lets the sparks fly. the 21-year-old is in training to become a welder. >> my grandfather was a welder, and so it's in my blood. >> reporter: lopez is among a half dozen women learning the welding trade for free at the non-profit jane addams resource corporation. the eight-month program provides training on a shop floor and in the classroom >> this will be an intermittent weld. >> reporter: it's work that requires good math skills, precision and patience. >> at the moment the students are all at different learning levels, and so we all have to go at our own pace and make sure that we fully understand. >> reporter: while welding is a trade traditionally dominated by
men, many women are naturals at it, says training director regan brewer. >> women tend to have the dexterity-- the manual dexterity-- needed for welding, and women tend to do very well, oftentimes getting hired over the male counterparts, in terms of in our program. >> reporter: the starting salary for welders is about $15 an hour, but experienced ones can make double that. with manufacturers ramping up production as the economy improves, welders are in high demand and there could be a shortage of them within the next decade. >> you have kind of that baby boomer population that is retiring, and as they leave those jobs, there really isn't a workforce that's trained to fill those particular positions. >> reporter: many companies are also trying to create diversity on the shop floor by hiring more women. so far, the three-year-old women in welding program has graduated two classes. about a third of the students have landed jobs. lopez has only been in the
program a month, but she thinks she's found a skill that will serve her well both professionally and personally. >> i'm a musician as well, and i would like to weld my own drums. >> reporter: diane eastabrook, "nightly business report," chicago. >> tom: if you've got kids or grandkids heading off to college next fall, you've no doubt spent a few nights tossing and turning thinking about how to pay for it. tonight's "money file" with donna rosato has three tips you need to know. she's senior writer at "money magazine." >> if you have a child headed off to college this fall, there's an important item on your to-do list: applying for financial aid. it starts with filling out the free application for federal student aid, known as the fafsa. but before you submit your forms, there are some surprising facts you need to know. first, being an early bird is usually a good thing, but don't file too early. you can submit as soon as january first, and there's no deadline to file the fafsa, but
most schools don't review applications until later-- typically march 1 for public colleges. instead, take the extra time to do your 2011 taxes, so you don't over- or under-estimate your income, mistakes that can hold up your application. a second point is that there's no such thing as making too much money to apply for aid. one-third of families don't file fafsas because they don't think they qualify, but nearly everyone is eligible for something, whether it's a scholarship, grant or a subsidized loan. finally, while parental assets are taken into account in determining your ability to pay for school, your child's assets have a much bigger impact. better to spend your kids cash down before you reduce your own. i'm donna rosato. >> tom: finally tonight, it may "nightly business report" for wednesday, february 15. i'm tom hudson. good night everyone and good night to you too, susie. >> susie: good night tom. i'm susie gharib. good night everyone. we hope to see all of you again tomorrow night. "nightly business report" is made possible by: